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BSA 104 Week 7 - Comparative Economic Development

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33 views3 pages

BSA 104 Week 7 - Comparative Economic Development

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mekagrace0130
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© © All Rights Reserved
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Comparative Economic Development

We then consider ten important features that developing countries tend to have in
common with each other, at least on average, in comparison with the developed world. In
each case we also discover that behind these averages are very Substantial differences among
developing countries in all of these dimensions that are important to appreciate and take into
account in development policy,
These areas are the following:
1. Lower levels of living and productivity
2. Lower levels of human capital
3. Higher levels of inequality and absolute poverty
4. Higher population growth rates
5. Greater social fractionalization
6. Larger rural populations but rapid rural-to-urban migration
7. Lower levels of industrialization and manufactured exports
8. Adverse geography
9. Underdeveloped financial and other markets
10. Lingering colonial impacts such as poor institutions and varying degrees of external
dependence (economic, political, cultural, and environmental).

The mix and severity of these challenges largely set the development constraints and
policy priorities of a developing nation.
After reviewing these commonalities and differences among developing countries, we
further consider key differences between conditions in today's developing countries and
those in now developed countries at an early stage of their development, and we examine the
controversy over whether developing and developed countries are now converging in their
levels of development.
We then draw on recent scholarship on comparative economic development to further
clarify how such an unequal world came about and remained so persistently unequal, and we
shed some light on the positive factors behind recent Progress in a significant portion of the
developing world. It becomes quite clear that colonialism played a major role in shaping
institutions that set the "rules of the economic game," which can limit or facilitate
opportunities for economic development. We examine other tractors in comparative
development, notably nations’ levels of inequality. We will come to appreciate why so many
developing countries have such difficulties in achieving economic development but also
begin to see some of the outlines of what can be done to overcome obstacles a encourage
faster progress.

The most common way to define the developing world is by per capita income.
Several international agencies, including the Organization for Economic Cooperation and
Development (OECD) and the United Nations, offer classifications of countries by their
economic status, but the best-known system is that of the International Bank for
Reconstruction and Development (IBRD), more commonly known as the World Bank. In
the World Bank's classification system, 208 economies with a population of at least 30,000
are ranked by their levels of gross national income (GND) per capita. These economies are
then classified as low-income countries (LICs), lower-middle-income countries (LMCs),
upper-middle-income countries (UMCs), high-income OECD countries, and other high-
income countries.
Measuring Development for Quantitative Comparison across Countries
In this section, we examine two approaches to summarizing development levels
across countries: real income per capita adjusted for purchasing power and the Human
Development Index, a measure that equally weights average income, health, and educational
attainments.
In accordance with the World Bank's income-based country classification scheme,
gross national income (GNI) per capita, the most common measure of the overall level of
economic activity, is often used as a summary index of the relative economic well-being of
people in different nations. It is calculated as the total domestic and foreign value added
claimed by a country's residents without making deductions for depreciation (or wearing
out) of the domestic capital stock. Gross domestic product (GDP) measures the total value
for final use of output produced by an economy, by both residents and non-residents. Thus
GNI comprises GDP plus the difference between the income residents receive from abroad
for factor services (labor and capital) less payments made to non-residents who contribute to
the domestic economy. Where there is a large non-resident population playing a major role in
the domestic economy (such as foreign corporations), these differences can be significant.

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